Static Pricing Problems under Mixed Multinomial Logit Demand

Ahmadreza Marandi, Virginie J.C. Lurkin (Corresponding author)

Research output: Contribution to journalArticleAcademicpeer-review

Abstract

Price differentiation is a common strategy for many transport operators. In this paper, we study a static multiproduct price optimization problem with demand given by a continuous mixed multinomial logit model. To solve this new problem, we design an efficient iterative optimization algorithm that asymptotically converges to the optimal solution. To this end, a linear optimization (LO) problem is formulated, based on the trust-region approach, to find a "good" feasible solution and approximate the problem from below. Another LO problem is designed using piecewise linear relaxations to approximate the optimization problem from above. Then, we develop a new branching method to tighten the optimality gap. Numerical experiments show the effectiveness of our method on a published, non-trivial, parking choice model.
Original languageEnglish
Number of pages38
JournalarXiv
Issue number2005.07482
Publication statusPublished - 18 May 2020

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